Numbering Code	P-MGT75 60162 LJ44	Year/Term	2022 ・ Second semester
Number of Credits	2	Course Type	Lecture
Target Year		Target Student
Language	English	Day/Period	Sat.4・5 every 2 weeks
Instructor name	ARAKI MASAO (Graduate School of Management Visiting Professor) KITAMURA KENICHIRO (Graduate School of Management Visiting Professor) YAMADA TADASHI (Graduate School of Management Professor)
Outline and Purpose of the Course	Project finance is a financing structure used primarily for long-term infrastructure, energy and industrial projects in which repayments for the loan issued to finance a project are made, in principle, exclusively from the cash flow generated by the project, and security for the loan is limited to the project's assets (including certain rights and interests in relation to the project). As a project finance transaction involves many participants and requires the preparation of a diverse set of contracts, the negotiation process is typically complicated. Due largely to reductions in government funding as well as increased involvement by the private sector in infrastructure projects, there has been remarkable progress in the development of this practice area. This course will initially cover the fundamental concepts and elements of a cross-border transaction, and will later address some of the basic characteristics of and issues related to project finance including, among other topics, risk analysis and mitigation, finance structuring and cash flow projection, and documentation-related issues. Finally, we will review certain actual project finance transactions.
Course Goals	The goal of this course is to provide a basic understanding of the following: ○large-scale natural resource and infrastructure projects and the various financing methods that may be implemented for those projects ○the concept of project finance and the roles of the various participants in a project finance transaction ○the calculation method to determine both debt service coverage ratio (DSCR) and debt-to-equity ratio ○risk allocation and classification of risks in project finance transactions ○the reasons why security interests are granted in project finance transactions and the concept of step-in rights ○recent project finance related trends and challenges
Schedule and Contents	”FY2021 version (to be updated)” ■Oct. 2 ARAKI Masao 1. Introduction and Goal Setting Objective: Introduction of the lecturers, self-introduction by the students attending the course (each student will be expected to explain why he/she is interested in attending this lecture and the specific topics of his/her interests so that the lecturer may identify where within the scope of the entire course, such topics will be covered and make necessary suggestions on how to address the same). Introduction of the seven (7) lectures and general explanation of the same (covering the syllabus, examination, grading criteria, and lecture reference materials). In order to learn the basics of project finance, it is essential to grasp the concepts of international energy & resources and infrastructure projects that will be done by private sector. We will learn some typical projects funded by project finance and discuss the following topics: What is a project? What is financing? Who provides project financing? What is non-recourse/limited recourse? What is bankability? The reason why the project finance is pursued. ■Oct.23 NAGATA Kaoru 2. Project Finance: Changing with the times Objective: In this session, we are going to take a look at three examples of Project Finance deal that achieved closing in recent thirty years and try to understand the basic mechanism of Project Finance. We would also like to discuss what has been changed and what has not been changed in thirty years history of Project Finance. Finally, we will try to consider how the future Project Finance is going to look like in the new global trends such as SDGs, decarbonization. ■Nov.13 NISHIU Tomohiko 3. Basics of Project Finance (1) ～Risk Identification & Allocation, Project Documents～ Objective: Risk identification and allocation plays the basic part of due diligence in the Project Finance transactions. We will cover the following topics, to understand types of risks and how to control them effectively to make Project Finance transactions bankable. ・Identifying risks that are typical to Project Finance ・Allocating risks among parties in the project documents ・Controlling risks, based on the “principle” ■Nov. 27 HOSOI Keisuke 4. Basics of Project Finance (2) ～Project Participants and Objectives, Structuring Techniques, Sources of Funding, Due Diligence ～ Objective: We will discuss following topics to further understand project finance in depth. ・Major project participants and their goals ・Key elements to structure project finance ・Typical issues which require tough negotiation among project participants ・Funding options (Source of Funding) ・How to conduct risks through due diligence, and how we mitigate them ■Dec. 11 MARUSHIMA Takahito 5. Basics of Project Finance (3) ～Cash Flow Projection, Sponsor Support and Credit Enhancement ～ Objective: Cash flow projection is one of the key components for structuring Project Finance. Here, we cover following topics, in order to acquire sufficient knowledge to structure, analyze and manage project’s cash flow projection: ・Basics of cash flow projection ・Concepts of various types of ratio applicable to Project Finance such as DSCR, LLCR and D:E ・Mechanism of hedging ・Mechanism of credit enhancement such as sponsor support and its effectiveness ■Dec. 25 KITAMURA Kenichiro 6. Characteristics of Project Finance Documents and Loan-related Agreements Objective: We will discuss how interest of parties can be protected by contracts / agreements. Using a power plant project in a country X as an example, we will cover following topics. ・Key features of core contracts/agreements of the project, such as Power Purchase Agreement (PPA) and Loan Agreement. ・Mechanism of protecting interest of each party, such as Step-in right, and how it works. ・How parties to contracts/agreements interact to protect own interest when the project faces problems ■Jan. 22 ARAKI Masao 7. Wrap-Up Objective: (i) We will discuss insurance arrangement in project finance and how insurance works for the benefit of lenders. (ii) We will reconfirm the characteristics and special nature of project finance. For this purpose, we will reconsider the project risk profile from unique points of view. ・Counterparties of project contracts; How important, Motivation, Responsibility and role of the counterparties, Term of commitment to the project by the counterparties ・Demand for products and services produced/supplied by the project Also, we would like to consider the restructuring of project finance deal, in order to understand how security package is going to work in case the project faces difficulty. Finally, we would like to have a wrap up discussion regarding project finance in the future.
Evaluation Methods and Policy	Final grade will be based on attendance (30%), assignment (20%) and final exam (50%).
Course Requirements	No prior requirements/knowledge required.
Study outside of Class (preparation and review)	Students are reminded to image and grasp the following things before class starts: ●Large-scale global projects such as infrastructure, oil and gas ●Role of the host country and sponsor ●Cross-border finance ●Recourse and non-recourse finance
Textbooks	Textbooks/References	Course materials will be provided to students through KULASIS.
References, etc.	Edited by John Dewar “International Project Finance”* Graham Vinter, Gareth Price, David Lee “Project Finance (Fourth Edition)” * E.R. Yescombe “Principles of Project Finance” Eduardo Engel et al. “The Economics of Public-Private Partnerships” (Note) Students do not have to purchase those books for the class. The two books marked with asterisk (*) are now in a collection of the Kyoto University library, thanks to the donation by the relevant law firms at which authors work.